Today

1
Todays Topic Sales Sales Channels

• Designing and Managing
• the
• Selling, Implementation and Customer Support
  Process

2
Course Schedule

• The Marketing Function (CTS)
• Sales Sales Channels (GolfLogix)
• Internet-based Marketing (HubSpot)
• RD Product Development (Guidant)
• Operations (Crocs)
• Product Launch (Invisalign)
• Final Exam (Mathsoft)

3
Last week Marketing Learnings

• Elements of the Marketing Mix (C4P)
• Importance of product positioning
• Positioning factors
• - positioning with? (target customers)
• - positioning against? (relevant competitors)
• - desires fears of positioning target
• - positioning content (differentiators,benefits)
  
• Promotion (marcomm) choosing the vehicle(s)/
  media that provides best and most cost-effective
  access to the target

4
Todays Agenda

• The basic sales functions
• Types of sales channels
• Choosing sales channels
• GolfLogix--- sales channel selection
• Readings and assignment for next week (HubSpot)

5
Sales Sales Channels

• Nothing (good) happens until somebody sells
  something

6
Sales Channels Learnings

• The basic sales functions (promotion), selling,
  fulfillment, and service
• Channel value-added Higher and lower value-added
  channels value-added functions
• Specific channel options direct (multiple
  types), OEM, integrator, VAR/VAD, distributor,
  dealer/retailer, etc
• Channel decision criteria considerations in
  matching products, customers, and channels
• Channel economics channel margin, profit
• Channel conflict coordinating multiple channels

7
Channels are Critical which channel(s) you use
affects

• The success youll have in selling (revenues)
• What you have to sell
• Who you are selling to
• The price you get for your product
• The design of the product
• The functions youll have to perform (and
  associated expenses) in marketing, sales,
  manufacturing, RD, IT and finance
• ---- almost
  everything!

8
Three Basic Sales Functions

• Promotion/marketing communications creates
  the environment for successful sales making the
  customer aware and interested
• Selling convincing the customer to buy
• (may sometimes be achieved by promotion alone)
• Fulfillment taking the order, delivering the
  product, installing/configuring/testing
• Service delivering post-sale customer support
  (repair, maintenance, training,
  consultation/helpline, upgrades, returns, )

9
Channel FunctionsOne or more of..

• Information
• Local advertising
• Product/brand choices
• Selling
• Availability
• Packaging
• Logistics
• Installation/ Configuration

• Integration
• Customization
• Training
• Maintenance
• Advice/helpline
• Warranty/returns
• Upgrades
• Repairs
• Testing

10
What sales channel(s) shouldGoodyear use for the
Aquatred?

• Goodyear stores
• Franchised dealers
• Independent dealers
• (Just Tires)

• Garages/service stations
• Warehouse clubs
• Mass merchandisers
• Large independent tire chains
• Auto supply stores

11
Goodyear replacement tire revenues by channel

• Goodyear stores 27
• Franchised dealers 8
• Independent dealers 50
• Government agencies 15

12
US market replacement tires revenues by channel

• Garages/service stations 6
• Warehouse clubs 6
• Mass merchandisers 12
• Manufacturer-owned outlets 9
• Small independent dealers 40
• Large independent tire chains 23
• Auto supply stores and other 4

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Required for Aquatred success?
promotion
selling
fulfillment
service
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Channel Capabilities
function Warehouse clubs Goodyear stores/dealers
promotion (marcomm) low medium
selling very low high
fulfillment medium medium
service low high
higher value-add channel
15
High(er) Value-added Channels are used for
products that are

• Technically complex, and/or
• Higher priced, higher margin ()
• Hard-to-sell/explain (incl. first-of-type)
  require sales efforts in addition to
  manufacturer-initiated promotion
• Application-specific
• Require significant support services (install,
  configure, maintain, customize, help/advice)
• ..and conversely for
• low(er) value-added channels

16
Never Forget.Two Additional Considerations

• Your channel partner(s) is selling (many) other
  products, not just yours
• Channels can (sometimes) accept lower gross
  margins on products,
• if they can make money on service, support
  and add-on sales

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High-Tech Channel Options

• Direct (own salesforce, agents, telemarketing,
  direct mail, catalog, internet)
• Original Equipment Manufacturer (OEM)
• Distributors (warehouses)
• Dealers/Resellers/Retailers
• VARs/VADs
• Systems integrators (sell or refer)
• Consultants (refer)
• Franchises (uncommon for tech products)

18
Channel Alternatives-- 5 most common in color --
Systs Integr
OEM
VAR
End- customers
You
Dealer
Distrib
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Manufacturer-Channel Relationship Elements

• Price, and volume discounts
• Contract timeframe
• Degree of exclusivity
• Sales area (region or customer type)
• Product support
• Selling support
• Marketing support
• Delivery commitments (logistical support)

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Those who sell for you require lots of support

• Training (product and sales)
• Ongoing technical support
• Selling support
• Marketing air cover
• Advertising support (co-op)
• Promotional programs (incl. pricing)
• Ordering/sales management systems
• Logistics (delivery/expediting, parts, returns,)

21
Deciding on Channels - 1

• Ability to satisfy customers needs
• Customer decision processes
• Customer preferences/expectations
• Market coverage
• Product characteristics (e.g., complexity)

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Deciding on Channels -2

• Competitive strategy/situation (advantage, shelf
  space, mind share, preemption, response)
• Availability of partners
• Competencies of potential partners
• Channel management (conflict, cost)
• Financials (revenue/margin and expense start-up
  and ongoing)!!

higher value-added channels have higher
expenses, and need higher gross margins to
make a profit
23
Channel Economics --- example
List price 100
Manufacturer COGS 35 expenses 20
Channel Partner COGS 65 expenses 20
end user price 90
channel price 65
gross margin 30/65
46 OI 10/65
15
gross margin 25/90
28 OI 5/90
6
24
Sales Readings

• Going to Market - read to understand types of
  sales channels, and the reasons for choosing them
• GolfLogix Measuring the Game of Golf (case)

25
GolfLogix Case Summary

• A start-up company in 2002
• Uses GPS technology to aid golfers
• Two product versions distance only and
  complete system
• Currently selling to/through golf courses
• Considering also using retail channels (would
  require a modification to their product)

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Homework questions

• What are the most significant end-customer and
  sales channel benefits of the each of the
  GolfLogix products? (consider golf course
  channel economics !)
• What is the market potential (number sold and
  GolfLogix revenues) of each of the GolfLogix
  products?
• Who are the appropriate target customers for the
  Distance Only product? For the Complete System?
• What are the positives-and-negatives of selling
  through golf courses? Through retail channels?
• If only one of the channels can be chosen, which
  one should GolfLogix use? Given the option of
  selling through both channels, should GolfLogix
  do that?

27
GolfLogix Sales Channels
golf- oriented distributors
golf courses
golfers
GolfLogix
retail
28
Target Golfers?
Occasional/Core/Avid 25/50/25
Handicap 20with/80wo Public/private
course 80/20
Distance only
Complete system
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Selecting Target Customers some considerations

• Segment size and revenue opportunity
• Customer benefits
• Customer interest (incl. current relationships)
• Customer ability-to-pay and leverage
• Competition/market coverage
• Sales issues sale time/complexity, cost, channel
  and associated profit margin
• Cost to serve/support
• Customer loyalty/lock-in
• Customer lifetime value
• Strategic value

30
Where golfers buy their equipment

• avid
  core
• Course pro shops 30 15
• Golf specialty stores 25 20
  
• Golf discount stores 20 25
• Mass merchants 10 15
• Sporting goods stores 10 15
• Internet 5
  10

31
Sales Channels Learnings

• The basic sales functions (promotion), selling,
  fulfillment, and service
• Channel value-added Higher and lower value-added
  channels value-added functions
• Specific channel options direct (multiple
  types), OEM, integrator, VAR/VAD, distributor,
  dealer/retailer, etc
• Channel decision criteria considerations in
  matching products, customers, and channels
• Channel economics channel margin, profit
• Channel conflict coordinating multiple channels

32
Reading for Next Week Internet Marketing

• HubSpot
• Inbound Marketing and Web 2.0
• (a case that focuses on
• new methods of promotion
• using the internet)

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HubSpot Case Summary

• Timeframe is 2009
• HubSpot was founded in 2006 currently has 1000
  customers
• Sells inbound marketing software that
  businesses use in their marketing/promotion
  efforts
• HubSpot has built its business by (exclusively)
  using inbound marketing techniques and its own
  products/tools
• To grow its business further, it faces questions
  about which customer segment to target, how to
  generate customer interest/contact, and which of
  the interested customers to pursue
• and whether to engage in outbound marketing

34
Mix elements Promotion

• Branding (creating a company or product image)
• Advertising (multiple media paid and free)
• Direct marketing (mail, catalog, telemarketing,
  internet)
• Reference customers (testimonials)
• Public relations
• Industry relations (trade orgs, industry
  analysts,)
• Trade shows and events
• Price promotions

35
Inbound vs. Outbound Marketing

• Outbound (traditional) marketing pushes
  information about the company and its products
  out to customers
• - mass and targeted advertising
• - trade shows and events
• - direct mail, etc
• Inbound marketing pulls customers and tries to
  get them interested enough to contact the company
  on their own initiative
• -search engines
• - blogs
• - social media, etc

36
Assignment Questions

• Which customers should HubSpot target Owner
  Ollies or Marketer Marys? Why?
• (see next chart for things to consider in
  making a decision)
• Does HubSpot have the right set of products for
  your chosen target customers? If not, what
  changes should they make?
• What are the positives-and-negatives of HubSpots
  software-as-a-service pricing strategy?
• What benefits would undertaking some outbound
  marketing have for HubSpot? What outcomes, if
  any, could outbound marketing deliver better than
  inbound marketing?
• (see second following chart, AIDA, for some
  hints)

37
Selecting Target Customers some considerations

• Segment size and revenue opportunity
• Customer benefits
• Customer interest (incl. current relationships)
• Customer ability-to-pay and leverage
• Competition/market coverage
• Sales issues sale time/complexity, cost, channel
  and associated profit margin
• Cost to serve/support
• Customer loyalty/lock-in
• Customer lifetime value
• Strategic value

38
AIDA Marketing Model

• Attention
• capture customers attention create
  awareness
• of the company and/or product
• Interest
• create interest in the products
  features,
• benefits or value
• Desire
• customers want it and/or feel that
  they need it
• Action
• customer takes action buys the product